Sunday, 22 April 2012

Depreciation on Painting Charges in Motor Own Damage Claims


The following notification was in force until  October 2012, when the IRDA came out with an “Exposure Draft” inviting all stake holders “to provide their comments on the draft proposal of modifications to “GR-9:Depreciation on Parts of Partial Loss Claims” on the erstwhile India Motor Tariff”.

Subsequently the IRDA issued a fresh notification (IRDA/NL/ORD/MISC/006/01/2013, dated 08thJanuary 2013) partially modifying the GR-9” which shall be applicable to all Motor Package Policies whose risk inception date fall on or after 01 February 2013.

Until March 31, 2012, General Insurance Companies in India did not apply any depreciation on painting charges under Motor Own Damage Claims. The entire painting charges (including cost of paint) was treated a labour charge while assessing claims. This is going to change for any claims reported on or after April 1, 2012.

At a meeting held on 29/02/2012, the General Insurance Council has decided that from April 1, 2012, the cost of paint will also be subject to depreciation just like other vehicle parts.

Though some of the dealers do bifurcate the cost of paint and the relevant labour charges, most of the dealers generally include the cost of paint as part of labour chages. 

In order to decide the cost of paint, it is now decided that the bifurcation of material & labour charges from the total value of the painting charges shall be s per VAT rule of the respective State Governments. Where the guidelines are not laid down, the insurance companies will follow the Court Order of Kerala Consumer Court which had advised bifurcation of the total cost into 70% as material cost and 30% as labour charges.

The VAT rules of the various State Governments are as given below:

States/UT
Section/Rule Ref
Service Ref
Standard Deduction of Labour as notified by state
Remarks
Andhra Pradesh
Rule 17
Painting
20%

Arunachal Pradesh
Section 5 & Rule 5
Painting
30%

Assam
Section 11 & Rule 10
Painting
20%

Bihar
Section 35 & Rule 18

NA
To follow 30% for Labour and 70% for the material as per Court Order
Chattisgarh
Rule 15

NA
To follow 30% for Labour and 70% for the material as per Court Order
Chandigargh
Rule 15

NA
To follow 30% for Labour and 70% for the material as per Court Order
Dadra & Nagar Haveli
Section 5 & Rule 3
Painting
30%

Daman & Diu
Section 5 & Rule 3
Painting
30%

Delhi
Section 5 & Rule 3
Painting
30%

Goa
Section 2(a1), 2(1d) & Rule 4A
Painting
50%

Gujarat
Section 2(30) & Rule 18AA
Painting
20%

Haryana
Section 2(zg) & Rule 5
Painting
30%

Himachal Pradesh`
Section 2(zd) & Rule 17
Painting
25%

Jharkhand
Section 9 & Rule 22
Painting
20%

Jammu & Kashmir
Section 2 (XXXVIII)

NA
To follow 30% for Labour and 70% for the material as per Court Order
Karnataka
Rule 3
Painting
20%

Kerala
Rule 10
Painting
25%

Maharashtra
Rule 58
Painting
20%

Meghalaya
Section 5 & Rule 12
Painting
20%

Mizorom
Section 8 (2)(c)
Painting
30%

Madhya Pradesh

Painting
NA
To follow 30% for Labour and 70% for the material as per Court Order
Manipur
Section 9 (2)(c)
Painting
20%

Nagaland
Section 2(XXXI)

NA
To follow 30% for Labour and 70% for the material as per Court Order
Orissa
Section 11

NA
To follow 30% for Labour and 70% for the material as per Court Order
Pondicherry
Section 15

NA
To follow 30% for Labour and 70% for the material as per Court Order
Punjab
Section 8 & Rule 15(4) (6)
Painting
25%

Rajasthan
Rule 22
Painting
25%

Sikkim


NA
To follow 30% for Labour and 70% for the material as per Court Order
Tamil Nadu
Section 5 & Rule 8(5)
Painting
30%

Tripura
Section 5 & Rule 3

NA
To follow 30% for Labour and 70% for the material as per Court Order
Uttar Pradesh
Rule 9
Painting
40%

Uttaranchl
Rule 14

NA
To follow 30% for Labour and 70% for the material as per Court Order
West Bengal
Section 18 & Rule 30
Painting
30%



Note:

  1. Depreciation to be applied on the painting material shall be as per the age of the vehicle, similar to other parts.
  2. Garages should bifurcate material and labour charges, out of the total painting charges as per the requirements laid down under government tax rules.

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